Gasoline crack in Asia dipped to an eight-month low of US$4.44 a barrel on Monday, while the naphtha differential between H2-September and H2-October fell to a 5-1/2 month low of US$6/ton as mounting supplies dragged the market down, as per Reuters.
The end of gasoline peak demand in the West and in Asia combined with key gasoline units in Asia having returned to production in July have resulted in heavier stock piles. Europe cutting back on gasoline production leads to higher excess of naphtha as it can be used as a motor fuel blend stock or be reformed into gasoline. Talk of high volumes of European and U.S. naphtha hitting Asian shores in August swiftly prompted spot premiums to sink further.
"Naphtha stocks will be too high by end of August," said a Singapore-based trader, adding that things will get "ugly" for sellers. South Korea's LG Chem has bought naphtha for H1-September delivery at under US$5/ton to Japan quotes on a cost-and-freight (C&F) basis, the lowest spot premium seen in the country in at least 5-1/2 months. Since the week of July 28, spot premiums into South Korea have been falling due to the high volumes of European and U.S. cargoes expected to arrive in Asia this month. Premiums for H1-September cargoes dropped to US$9 on July 30, then to US$5 on July 31 from US$15-16/ton in mid-July, Reuters data showed.